Article explains Amendment in Companies Act, 2013 vide Companies (Amendment) Act, 2019 in Section 26 : Matters to be stated in Prospectus amended, Section29 : Public Offer of Securities to be in Dematerilised Form, Section 35 : Civil Liability for Mis-statements in Prospectus, Section 90 : Register of significant beneficial owners in a company, Section 90 : Register of significant beneficial owners in a company, Section 132 : Constitution of NFRA, Section 135 : Corporate Social Responsibility, Section 212 : Investigation into Affairs of Company by Serious Fraud Investigation Office, Section 241 : Application to Tribunal for Relief in Cases of Oppression, etc Sub-Sections (2) inserted, Section 242 : Powers of Tribunal, Section 243 : Consequence of Termination or Modification of Certain Agreements,Section 272 : Petition for Winding Up and Section 398 : Provisions Relating to Filing of Applications, Documents, Inspection, etc., in Electronic Form.

[Bold Fonts indicates: Substitution/ Insertion]

S. No. Sections Existing Provision Amendment
1. Section 26 : Matters to be stated in Prospectus

Effect:

Sub-Section (4), (5) & (6) amended

“Before issuing a prospectus by or on behalf of a company or in relation to an intended company, a copy of that prospectus which is signed by every person who is named therein as a director or proposed director of the company or by his duly authorised attorney, shall be delivered to the Registrar for Registration (either on or before the date of publication of such prospectus)”. “Before issuing a prospectus by or on behalf of a company or in relation to an intended company, a copy of that prospectus which is signed by every person who is named therein as a director or proposed director of the company or by his duly authorised attorney, shall be filed to the Registrar (either on or before the date of publication of such prospectus)”.
2. Section 26 : Matters to be stated in Prospectus

Effect:

Sub-Section (7) omitted

 

7.The Registrar shall not register a prospectus unless the requirements of this section with respect to its registration are complied with and the prospectus is accompanied by the consent in writing of all the persons named in the prospectus. -Omitted-

[As the only Registration of prospectus is not sufficient now, it needs to be filed with the Registrar now, therefore the requirements of this section with respect to its registration needs to be deleted].

3. Section29 : Public Offer of Securities to be in Dematerialised Form

Effect:

Sub-Section (1) (b) amended

1.(b).In case of some prescribed class or classes of public companies, it’s mandatory to an issue the securities only in dematerialised form by complying with the provisions of the Depositories Act, 1996 (22 of 1996) and the regulations made there under. 1.(b).In case of some prescribed class or classes of companies, it’s mandatory to an issue the securities only in dematerialised form by complying with the provisions of the Depositories Act, 1996 (22 of 1996) and the regulations made there under.
4. Section 29 : Public Offer of Securities to be in Dematerialised Form

Effect:

Sub-Section (1A) inserted

-No Provision- 1A.In case of such class or classes of unlisted companies as may be prescribed, the securities shall be held or transferred only in dematerialised form in the manner laid down in the Depositories Act, 1996 and the regulations made thereunder.
5. Section 35 : Civil Liability for Mis-statements in Prospectus

Effect:

Sub-Section (2) (c) amended

2.(c). that, as regards every misleading statement purported to be made by an expert or contained in what purports to be a copy of or an extract from a report or valuation of an expert, it was a correct and fair representation of the statement, or a correct copy of, or a correct and fair extract from, the report or valuation; and he had reasonable ground to believe and did up to the time of the issue of the prospectus believe, that the person making the statement was competent to make it and that the said person had given the consent required by sub-section (5) of section 26 to the issue of the prospectus and had not withdrawn that consent before delivery of a copy of the prospectus for registration or, to the defendant’s knowledge, before allotment there under. 2.(c) that, as regards every misleading statement purported to be made by an expert or contained in what purports to be a copy of or an extract from a report or valuation of an expert, it was a correct and fair representation of the statement, or a correct copy of, or a correct and fair extract from, the report or valuation; and he had reasonable ground to believe and did up to the time of the issue of the prospectus believe, that the person making the statement was competent to make it and that the said person had given the consent required by sub-section (5) of section 26 to the issue of the prospectus and had not withdrawn that consent before filing of a copy of the prospectus with the Registrar or, to the defendant’s knowledge, before allotment there under.
6. Section 90 : Register of significant beneficial owners in a company

Effect:

Sub-Section (4A) inserted

-No Provision- 4A.Every company shall take necessary steps to identify an individual who is a significant beneficial owner in relation to the company and require him to comply with the provisions of this section.
7. Section 90 : Register of significant beneficial owners in a company

Effect:

Sub-Section (9A) inserted

-No Provision- 9A.The Central Government may make rules for the purposes of this section.
8. Section 90 : Register of significant beneficial owners in a company

Effect:

Sub-Section (11) substituted

11.If a company, required to maintain register under sub-section (2) and file the information under sub-section (4), fails to do so or denies inspection as provided therein, the company and every officer of the company who is in default shall be punishable with fine which shall not be less than ten lakh rupees but which may extend to fifty lakh rupees and where the failure is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the failure continues. 11.If a company, required to maintain register under sub-section (2) and file the information under sub-section (4) or required to take necessary steps under sub-section (4A), fails to do so or denies inspection as provided therein, the company and every officer of the company who is in default shall be punishable with fine which shall not be less than ten lakh rupees but which may extend to fifty lakh rupees and where the failure is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the failure continues.
9. Section 132 : Constitution of NFRA

Effect:

Sub-Section (1A) inserted

-No Provision- 1A.The National Financial Reporting Authority shall perform its functions through such divisions as may be prescribed
10. Section 132 : Constitution of NFRA

Effect:

Sub-Section (3A) & (3B) inserted

-No Provision- (3A).Each division of the NFRA shall be presided over by the Chairperson or a full-time Member authorised by the Chairperson.

(3B).There shall be an executive body of the NFRA consisting of the Chairperson and full-time Members of such Authority for efficient discharge of its functions under sub-section (2) [other than clause (a)] and sub-section (4).”

11. Section 132 : Constitution of NFRA

Effect:

Sub-Section (4) (c) (B) substituted

4.(c)(B).Debarring the member or the firm from engaging himself or itself from practice as member of the Institute of Chartered Accountant of India referred to in clause (e) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 for a minimum period of six months or for such higher period not exceeding ten years as may be decided by the National Financial Reporting Authority. 4.(c)(B).Debarring the member or the firm from—

I. being appointed as an auditor or internal auditor or undertaking any audit in respect of financial statements or internal audit of the functions and activities of any company or body corporate; or

II. performing any valuation as provided under section 247,

for a minimum period of six months or such higher period not exceeding ten years as may be determined by the National Financial Reporting Authority.”

12. Section 135 : Corporate Social Responsibility

Effect:

Sub-Section (5) amended

The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy. The Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.
13. Section 135 : Corporate Social Responsibility

Effect:

2ND Proviso to Sub-Section (5) amended

Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount. Provided further that if the company fails to spend such amount, the Board shall, in its report made under clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount and unless the unspent amount relates to any ongoing project referred to in sub-section (6), transfer such unspent amount to a Fund specified in Schedule VII, within a period of six months of the expiry of the financial year.
14. Section 135 : Corporate Social Responsibility

Effect:

Sub-Sections (6), (7) & (8) inserted

-No Provision- (6).Any amount remaining unspent under sub-section (5), pursuant to any ongoing project, fulfilling such conditions as may be prescribed, undertaken by a company in pursuance of its Corporate Social Responsibility Policy, shall be transferred by the company within a period of thirty days from the end of the financial year to a special account to be opened by the company in that behalf for that financial year in any scheduled bank to be called the Unspent Corporate Social Responsibility Account, and such amount shall be spent by the company in pursuance of its obligation towards the Corporate Social Responsibility Policy within a period of three financial years from the date of such transfer, failing which, the company shall transfer the same to a Fund specified in Schedule VII, within a period of thirty days from the date of completion of the third financial year.

(7).If a company contravenes the provisions of sub-section (5) or sub-section (6), the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees and every officer of such company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.

(8).The Central Government may give such general or special directions to a company or class of companies as it considers necessary to ensure compliance of provisions of this section and such company or class of companies shall comply with such directions.

15. Section 212 : Investigation into Affairs of Company by Serious Fraud Investigation Office

Effect:

Sub-Sections (8) amended

(8).If the Director, Additional Director or Assistant Director of Serious Fraud Investigation Office authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of any offence punishable under sections referred to in sub-section (6), he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest. (8).If any officer not below the rank of Assistant Director of Serious Fraud Investigation Office authorised in this behalf by the Central Government by general or special order, has on the basis of material in his possession reason to believe (the reason for such belief to be recorded in writing) that any person has been guilty of any offence punishable under sections referred to in sub-section (6), he may arrest such person and shall, as soon as may be, inform him of the grounds for such arrest.
16. Section 212 : Investigation into Affairs of Company by Serious Fraud Investigation Office

Effect:

Sub-Sections (9) amended

(9).The Director, Additional Director or Assistant Director of Serious Fraud Investigation Office shall, immediately after arrest of such person under sub-section (8), forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Serious Fraud Investigation Office in a sealed envelope, in such manner as may be prescribed and the Serious Fraud Investigation Office shall keep such order and material for such period as may be prescribed. (9).The officer authorised under sub-section (8) shall, immediately after arrest of such person under such sub-section, forward a copy of the order, along with the material in his possession, referred to in that sub-section, to the Serious Fraud Investigation Office in a sealed envelope, in such manner as may be prescribed and the Serious Fraud Investigation Office shall keep such order and material for such period as may be prescribed.
17. Section 212 : Investigation into Affairs of Company by Serious Fraud Investigation Office

Effect:

Sub-Sections (10) amended

(10).Every person arrested under sub-section (8) shall within twenty-four hours, be taken to a Judicial Magistrate or a Metropolitan Magistrate, as the case may be, having jurisdiction:

Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of arrest to the Magistrate’s court.

(10).Every person arrested under sub-section (8) shall within twenty-four hours, be taken to a Special Court or Judicial Magistrate or a Metropolitan Magistrate, as the case may be, having jurisdiction:

Provided that the period of twenty-four hours shall exclude the time necessary for the journey from the place of arrest to the Special Court or Magistrate’s court.

18. Section 212 : Investigation into Affairs of Company by Serious Fraud Investigation Office

Effect:

Sub-Sections (14A) inserted

-No Provision- (14A).Where the report under sub-section (11) or sub-section (12) states that fraud has taken place in a company and due to such fraud any director, key managerial personnel, other officer of the company or any other person or entity, has taken undue advantage or benefit, whether in the form of any asset, property or cash or in any other manner, the Central Government may file an application before the Tribunal for appropriate orders with regard to disgorgement of such asset, property or cash and also for holding such director, key managerial personnel, other officer or any other person liable personally without any limitation of liability.
19. Section 241 : Application to Tribunal for Relief in Cases of Oppression, etc

Effect:

1st proviso to

Sub-Sections (2) inserted

(2).The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter. (2).The Central Government, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public interest, it may itself apply to the Tribunal for an order under this Chapter.

Provided that the applications under this sub-section, in respect of such company or class of companies, as may be prescribed, shall be made before the Principal Bench of the Tribunal which shall be dealt with by such Bench.

20. Section 241 : Application to Tribunal for Relief in Cases of Oppression, etc

Effect:

Sub-Sections (3), (4) & (5) inserted

-No Provision- (3).Where in the opinion of the Central Government there exist circumstances suggesting that––

(a) any person concerned in the conduct and management of the affairs of a company is or has been in connection therewith guilty of fraud, misfeasance, persistent negligence or default in carrying out his obligations and functions under the law or of breach of trust;

(b) the business of a company is not or has not been conducted and managed by such person in accordance with sound business principles or prudent commercial practices;

(c) a company is or has been conducted and managed by such person in a manner which is likely to cause, or has caused, serious injury or damage to the interest of the trade, industry or business to which such company pertains; or

(d) the business of a company is or has been conducted and managed by such person with intent to defraud its creditors, members or any other person or otherwise for a fraudulent or unlawful purpose or in a manner prejudicial to public interest,

the Central Government may initiate a case against such person and refer the same to the Tribunal with a request that the Tribunal may inquire into the case and record a decision as to whether or not such person is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company.

(4).The person against whom a case is referred to the Tribunal under sub-section (3), shall be joined as a respondent to the application.

(5) Every application under sub-section (3)––

(a) shall contain a concise statement of such circumstances and materials as the Central Government may consider necessary for the purposes of the inquiry; and

(b) shall be signed and verified in the manner laid down in the Code of Civil Procedure, 1908, for the signature and verification of a plaint in a suit by the Central Government.

21. Section 242 : Powers of Tribunal

Effect:

Sub-Sections (4A) inserted

-No Provision- (4A).At the conclusion of the hearing of the case in respect of sub-section (3) of section 241, the Tribunal shall record its decision stating therein specifically as to whether or not the respondent is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company.
22. Section 243 : Consequence of Termination or Modification of Certain Agreements

Effect:

Sub-Sections (1A) inserted

-No Provision- (1A).The person who is not a fit and proper person pursuant to sub-section (4A) of section 242 shall not hold the office of a director or any other office connected with the conduct and management of the affairs of any company for a period of five years from the date of the said decision:

Provided that the Central Government may, with the leave of the Tribunal, permit such person to hold any such office before the expiry of the said period of five years.

(1B).Notwithstanding anything contained in any other provision of this Act, or any other law for the time being in force, or any contract, memorandum or articles, on the removal of a person from the office of a director or any other office connected with the conduct and management of the affairs of the company, that person shall not be entitled to, or be paid, any compensation for the loss or termination of office.”

23. Section 243 : Consequence of Termination or Modification of Certain Agreements

Effect:

Sub-Sections (2) amended

(2).Any person who knowingly acts as a managing director or other director or manager of a company in contravention of clause (b) of sub-section (1), and every other director of the company who is knowingly a party to such contravention, shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to five lakh rupees, or with both. (2).Any person who knowingly acts as a managing director or other director or manager of a company in contravention of clause (b) of sub-section (1) or sub-section (1A), and every other director of the company who is knowingly a party to such contravention, shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to five lakh rupees, or with both.
24. Section 272 : Petition for Winding Up

Effect:

Sub-Sections (3) amended

(3).The Registrar shall be entitled to present a petition for winding up under section 271, except on the grounds specified in clause (a) or clause (e) of that sub-section. (3).The Registrar shall be entitled to present a petition for winding up under section 271, except on the grounds specified in clause (a) or clause (e) of that section.
25. Section 398 : Provisions Relating to Filing of Applications, Documents, Inspection, etc., in Electronic Form

Effect:

Sub-Sections (1)(f) amended

1.(f) the Registrar shall register change of registered office, alteration of memorandum or articles, prospectus, issue certificate of incorporation, register such document, issue such certificate, record the notice, receive such communication as may be required to be registered or issued or recorded or received, as the case may be, under this Act or the rules made there under or perform duties or discharge functions or exercise powers under this Act or the rules made thereunder or do any act which is by this Act directed to be performed or discharged or exercised or done by the Registrar in the electronic form in such manner as may be prescribed. 1.(f) the Registrar shall register change of registered office, alteration of memorandum or articles, issue certificate of incorporation, register such document, issue such certificate, record the notice, receive such communication as may be required to be registered or issued or recorded or received, as the case may be, under this Act or the rules made there under or perform duties or discharge functions or exercise powers under this Act or the rules made thereunder or do any act which is by this Act directed to be performed or discharged or exercised or done by the Registrar in the electronic form in such manner as may be prescribed.

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